What a Week: No Energy for Stocks

Inflation jitters, hawkish Fedspeak and a loss of leadership put major averages on their heels.

Stocks got pounded this week, with major stock proxies falling to three-month lows as inflation jitters and hawkish Fed officials fueled concerns about the economy and profits.

A fuzzy -- but better-than-expected -- post-hurricane jobs report helped the market set aside some of these concerns on Friday, even if just for one day. The Dow Jones Industrial Average added a mere 5.21 points, or 0.05%, to 10,292.31. The blue-chip average was lifted by the likes of Exxon Mobil ( XOM), Caterpillar ( CAT), IBM ( IBM) and Merck ( MRK).

The S&P 500 added 4.41 points, or 0.37%, to 1195.90. The Nasdaq Composite rose 6.27 points, or 0.30%, to 2090.35.

Those fractional gains paled in comparison with the sharp pullback experienced in the previous four sessions. For the week, the Dow lost 276 points, or 2.6%. The S&P fell 33 points, or 2.7%. The Nasdaq saw the steepest decline, losing 61 points, or 2.8%.

Weakness in crude prices -- which hit a two-month low this week before rebounding Friday -- might have otherwise helped major averages, but they were instead waylaid by weakness in energy stocks such as Exxon Mobil, Amerada Hess ( AHC), Occidental Petroleum ( OXY), Chevron ( CVX) and Valero ( VLO). For the week, the Amex Oil Index fell 7.4%, and the Philadelphia Stock Exchange Oil Service Index shed 7.8%.

Complacency's Comeuppance

What caused the sharp overall pullback in shares? For Cantor Fitzgerald strategist Marc Pado, the market had been too complacent about the economic and profit outlook after the energy shock caused by hurricanes Katrina and Rita. Stocks continued to rise until the end of September, even after the Federal Reserve hiked rates for the 11th time in a row and signaled there was more to come.

Helping to end the complacency, the Fed this week sent the perfect messenger: Dallas Fed President Richard Fisher, made famous for using baseball analogies to wrongly signal that the Fed would soon finish hiking interest rates back in June.